No Need To Worry About The Decline Of Exports, The Normal Operation Of The Steel Industry.

Zhou Tao securities

In June, the domestic steel export accident dropped to 5 million 220 thousand tons, lower than the forecast in the early stage of the market. We think that investors need not worry too much about the data of the single month. After all, we need to pay attention to the whole year's running situation, and the data of the single month are more disturbed by noise.

Our exports account for about 10% of the domestic output. Iron and steel products first satisfy domestic demand and then export (at least the key steel enterprises are all exporting ideas). Moreover, the corresponding export orders for June should be in April ~5, when domestic steel prices had reached a high level, and domestic profits were considerable.

We also do not rule out that the May 12th earthquake affected the export volume of steel products, especially those related to infrastructure construction, and did not exclude the potential increase of some long dealers' demand for earthquakes.

Are there major changes in key export areas?

Although exports increased substantially in May, the export reduction rate was also obvious. Vietnam reduced 240 thousand tons, South Korea reduced 30 thousand tons, and Philippines reduced by 60 thousand tons.

Because South Korea is the largest country in China's steel exports, and Vietnam is the fastest growing country of China's exports since 2008. We expect exports of South Korea and Vietnam to continue to decline in June, while exports from the United States and the European Union may be flat or declining, while the remaining areas remain stable, resulting in no increase in total exports, especially in the Vietnamese region, which is likely to decline 200 thousand tons in June due to the impact of domestic economic crisis.

Comparing the price difference between domestic and overseas, we chose CRU steel price index to compare with Steel Association index. The price gap in 4-5 months is expanding continuously, and there is no obvious suppression of export factors. Of course, the current price difference is bigger from the price difference. The difference between April 4th and July 4th is 96 and 128 points respectively, while the price index difference in March 28th is 79, so the influence of this factor is not obvious.

On the issue of ocean freight, the shipping cost of Brazil's April 4th to Beilun port is 72.83.

Continued to rise to 108

The range is 36 US dollars. We expect freight factor to be one of the factors that affect the export of steel.

However, since June 6th, the freight rate has started to decline, and the current freight rate has dropped to $84, which has weakened the export restraining force.

On the whole, there are many factors that affect the export of steel products in June 2008. We initially believe that because of the sharp rise in freight rates, the anti-dumping in Europe and the United States has reduced the import of Chinese steel, and the countries affected by the financial crisis in Vietnam have also substantially reduced the import of steel products. This led to the fact that the export did not show the expected rapid growth, coupled with the expected increase in domestic demand caused by earthquake in May. Traders were also willing to digest the steel products in China, so the total volume of steel exports in June dropped slightly.

In fact, the reason why we are so worried about the data of steel exports is that we worry that the export volume is too large to lead the country to impose tariffs on steel exports, while exports have declined sharply. We are also worried about the serious decline in foreign demand and indirectly lead to a sharp fall in domestic steel prices.

We believe that there will be no big problems in the small fluctuations.

Referring to current factors of sea freight and price differentials, it is not likely that exports will continue to decline in July. As a whole, investors do not have to worry too much about export data in June, and the steel industry is still operating on a normal track.